Accounting : Statement of Cash Flows
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Example Questions
Example Question #1 : Statement Of Cash Flows
On the statement of cash flows, an increase in inventory would be reported in which of the following sections?
Operating activity
None of these
Financing activity
Investing activity
Operating activity
There are three primary types of cash flow activities and the statement of cash flows has a section for each activity: operating, investing, and financing. Operating activities are defined as changes in current assets and current liabilities. Investing activities are described as changes in long-term assets. Last, financing activities are changes in long-term liabilities and stockholders' equity; therefore, an increase in inventory would be reported as an operating activity.
Example Question #2 : Statement Of Cash Flows
Which of the following are considered to be cash equivalents?
All of these
Money market funds
Commercial paper
Treasury bills
All of these
In order for an asset to be considered as cash equivalent, it needs to be readily convertible into cash; furthermore, they must be near maturity so that they carry little to no risk of value alteration due to changes in interest rates. Generally, cash equivalents include investments with maturities of three months or less from the date of purchase. All of these—Treasury bills, commercial paper, and money market funds—are cash equivalents.
Example Question #3 : Statement Of Cash Flows
On the statement of cash flows, an increase in inventory would be reported in which of the following sections?
Investing activity
Financing activity
None of these
Operating activity
Operating activity
There are three primary types of cash flow activities and the statement of cash flows has a section for each activity: operating, investing, and financing. Operating activities are defined as changes in current assets and current liabilities. Investing activities are described as changes in long-term assets. Last, financing activities are changes in long-term liabilities and stockholders' equity; therefore, an increase in inventory would be reported as an operating activity.
Example Question #4 : Statement Of Cash Flows
Which of the following are considered to be cash equivalents?
All of these
Money market funds
Treasury bills
Commercial paper
All of these
In order for an asset to be considered as cash equivalent, it needs to be readily convertible into cash; furthermore, they must be near maturity so that they carry little to no risk of value alteration due to changes in interest rates. Generally, cash equivalents include investments with maturities of three months or less from the date of purchase. All of these—Treasury bills, commercial paper, and money market funds—are cash equivalents.
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